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Prior research on meeting or beating earnings thresholds documents that firms with earnings momentum are awarded with valuation premiums. However, it is unclear from this strand of literature why this is the case. Therefore, this study aims to investigate the effects of time-varying earnings persistence on earnings momentum and their pricing effects.

This study exploits a firm that reports earnings momentum as research setting to examine whether earnings persistence is significantly higher for firms with consecutive earnings increases. In addition, it investigates a relation between earnings momentum and fundamentals-driven earnings persistence and estimates return associations of earnings momentum conditional on economic-based persistence of earnings.

The empirical evidence suggests that firms with earnings momentum reflect higher time-varying earnings persistence. It further reveals that longer duration of earnings momentum is associated with higher fundamentals-driven earnings persistence. More importantly, valuation premiums are exclusively assigned to earnings momentum determined by strong firm fundamentals, not momentum itself.

This study provides new empirical evidence that valuation premiums accrued to firms with earnings momentum are conditional on time-varying earnings persistence. The research implications are relevant to investors, regulators and auditors, as the results bring conclusions that earnings momentum reflects successful business models not poor accounting quality. This leads to a more complete view of earnings momentum and helps allocate resources when evaluating earnings-momentum firms.

The worldwide imposition of lockdown measures to control the 2020 coronavirus disease 2019 (COVID-19) outbreak has shifted most executive communications with external stakeholders online, resulting in quick responses from stakeholders. This study aims to understand how presentational styles exhibited in online communication induce immediate audience responses and empirically test the effectiveness of reactive impression management tactics.

The authors analyze presentational styles using MP3 files containing executive utterances during earnings call conferences held by S&P 100-listed firms after June 2020, the quarter after the World Health Organization declared the COVID-19 outbreak a pandemic on March 11, 2020. Using timestamps, the authors link each utterance to a 1-minute interval change in the ask/bid prices of the stocks that occurs a minute after the corresponding utterance begins.

Exhibiting an informational presentation style in earnings calls leads to positive and immediate audience responses. Managers tend to increase their reliance on promotional presentation styles rather than on informational ones when quarterly earnings exceed market forecasts.

Drawing on organizational genre theory, this research identifies the discrepancy between the presentation styles that audiences positively respond to and those that managers tend to exhibit in earnings calls and provides a reactive impression management typology for immediate responses from online audiences.

This chapter aims to examine the impact of whistleblowing policy (WH) on earnings management (EM) in an emerging market, Egypt. Our sample period from 2014 to 2019: the pre-whistleblowing policy period is 2014–2016 and the post-whistleblowing policy period is 2017–2019 with a total of 780 observations and the data are analyzed using ordinary least squares (OLS) regression analysis. Data are collected from annual reports, corporate governance reports, and companies’ website. The empirical analysis shows that whistleblowing policy coefficient is negative and significantly impacts EM in Egyptian firms. The result shows that when the firm adopts a whistleblowing policy, it led to decrease in EM. In addition, we provide strong and robust evidence by the difference-in-difference (DID) method to show that whistleblowing is significantly negatively associated with the extent of EM, which indicates that firms have an effective whistleblowing policy and can have several benefits. Firstly, it can help to identify and prevent illegal or unethical behavior within an organization, which can ultimately save the company from potential legal and reputational damage. Secondly, a whistleblowing policy can empower employees to speak up about any concerns they have, without fear of retaliation, which can help to create a more transparent and ethical work environment. Overall, an effective whistleblowing policy can contribute to the long-term success of a company and the broader economy. The findings of this chapter are relevant to policymakers, governments, management, employees, and shareholders to constraining EM in Egyptian firms.

The purpose of our study is to investigate the impact of corporate culture on sales order backlog.

The authors use regression analysis to examine the relation between corporate culture and the level of sales order backlog, an important leading indicator of firm performance.

Using a large panel sample of US firms for the period of 2003–2021, the authors find a significant and positive relation, suggesting that firms with strong corporate culture have a higher level of sales order backlog.

The study findings contribute to two separate areas of research: corporate culture in management literature and sales order backlog in accounting literature. Prior study has focused on the impact of corporate culture on current firm performance. This study extends prior research by investigating the impact of corporate culture on order backlog, an important leading indicator of future performance.

This study aims to validate the link between production manipulation and a firm’s performance variability (fundamentals and stock returns). It explores whether executives' risk-taking incentives encourage production deviations around the normal level during uncertainty.

Utilizing panel data of manufacturing firms from Compustat over three decades, the study investigates production management practices during economic uncertainty. The Economic Policy Uncertainty Index (EPU) is employed as a key metric. The empirical strategy involves documenting the effect of economic uncertainty on overproduction and underproduction, examining the role of executive compensation and assessing the impact on risk.

The research finds that risk-taking incentives increase over/underproduction, particularly amplifying the extent of underproduction during uncertainty. Production deviation rises, indicating that firms take greater risk by engaging in abnormal business operations. The study’s results are robust against various econometric methods, emphasizing the influence of risk-taking incentives on corporate production decisions.

While providing valuable insights, the study acknowledges inherent limitations, including factors influencing production decisions beyond risk-taking incentives. Further research could explore additional determinants for a comprehensive understanding.

The findings highlight the potential dark side of executive compensation that motivates suboptimal risk-taking decisions, impacting risk, cost of capital and firm performance. Policymakers and compensation committees can use these insights to design efficient systems that mitigate moral hazard problems associated with productivity changes.

The study emphasizes the broader social implications of production manipulation under uncertainty. It prompts discussions on the ethical considerations of managerial opportunism, its potential consequences for stakeholders and market dynamics.

This study contributes to the literature by examining the role of economic uncertainty on production manipulation and the influence of risk-taking incentives. It extends the earnings management literature by considering real activity manipulation and emphasizing the importance of decomposing production deviation into positive and negative values.

Companies avoid taxes in a variety of ways and use different methods to do that, one of the most common being earnings management. The purpose of this paper is to investigate whether companies manipulate their financial data in order to reduce taxes paid.

We considered a sample of 63 listed Romanian companies for the period 2016–2021. The Beneish model was used for estimating earnings management, and the effective tax rate was used to measure tax avoidance. The analysis was carried out using regression analysis in Stata13 software.

The findings of the research indicate a negative and statistically significant association between effective tax rate and earnings management, implying that one of the main reasons why companies manipulate their earnings to reduce tax burden and avoid taxes. Moreover, our results show that return on assets (ROA) has a statistically significant negative influence on the effective tax rate. Furthermore, our analysis reveals that firm size, growth, and Big4 audit have no effect on effective tax rate.

Because it analyzes concrete cases using financial data and provides some recommendations for addressing the issue of tax avoidance, this work is useful in advancing both quantitative and qualitative research on this topic. This research is relevant for businesses, governments, regulators, audit professionals and investors.

The study, by analyzing concrete cases using reported financial data, contributes in filling the gap within the literature that results from a lack of scientific research on the relationship between tax avoidance and earnings management, and then it clarifies the nature of the causal connection between them. Moreover, it considers a combination of firm related variables including performance, size and also audit quality.

Exploiting a unique measure of hostile takeover exposure principally based on the staggered adoption of state legislations, the authors investigate how external audit quality is influenced by the discipline of the takeover market. External auditors and the takeover market both function as important instruments of external corporate governance.

The authors execute a standard regression analysis and run a variety of robustness checks to minimize endogeneity, namely, propensity score matching (PSM), entropy balancing, an instrumental-variable analysis, Generalized method of moment (GMM) dynamic panel data analysis and Lewbel's (2012) heteroscedastic identification.

The authors’ immense sample spans half a century, encompassing nearly 180,000 observations and 17 takeover-related state legislations, one of the largest samples in the literature in this area. The authors’ results suggest that firms with more takeover exposure are significantly less likely to use Big N auditors. Therefore, a more active takeover market results in poorer external audit quality, corroborating the substitution hypothesis. The discipline of the takeover market substitutes for the necessity for a high-quality external auditor. Specifically, a rise in takeover susceptibility by one standard deviation lowers the probability of using a Big N auditor by 4.29%.

The authors’ study is the first to examine the effect of the takeover over market on audit quality using a novel measure of hostile takeover susceptibility mainly based on the staggered implementation of state legislation. Because the enactment of state legislation is beyond the control of any firm individually, it is plausibly exogenous. The authors’ results therefore probably reflect a causal influence rather than merely a correlation.

This study examines the performance effect of working capital for a large sample of Indian manufacturing firms in light of supply chain disruption, i.e. the COVID-19 pandemic.

This study is based on secondary data collected from the Prowess database on Indian manufacturing firms listed on the Bombay Stock Exchange (BSE) 500. Panel data regression analyses are used to estimate all models. Moreover, this study has employed robust standard errors to consider for heteroscedasticity concerns.

The results challenge the current notion of working capital investment and reveal that higher working capital has a positive and significant impact on firm performance. Further, it highlights that Indian manufacturing firms suffered financially post-COVID-19 as they significantly lack the working capital to run day-to-day operations.

This research contributes to the scant literature by examining the association between working capital financing and firm performance in light of the COVID-19 pandemic, representing typical developing economies like India.

This study aims to examine the reaction of anchor investors (AIs) to pre-IPO earnings management (EM). The authors use the unique detailed bid data from the Indian anchor experiment. The authors also study the reputed AIs’ EM detection ability and pricing behavior in response to pre-IPO EM.

The authors use unique AI bid data for 169 Indian IPO firms. Utilizing the logistic regression and Tobit regression models with industry and year-fixed effects, the authors examine the relationship between various measures of AI participation and proxies of short-term and long-term discretionary accruals.

The authors document that pre-IPO EM is positively associated with the likelihood of anchor backing but negatively related to the likelihood of reputed anchor backing. The findings indicate that AIs are misled by pre-IPO EM, but reputed AIs are not. The authors also observe that reputed AIs, compared to the non-reputed, pay less than the upper band with increasing EM. The findings are robust to using various AI measures and EM proxies.

The findings have significant implications for regulators in the implementation of AI concept in non-anchor markets and better implementation of policies in existing anchor settings. Findings can also be relevant for non-institutional investors in the IPO domain.

This is one of the few studies on institutional investors' IPO bidding behavior in response to pre-IPO EM. However, this is the first study to analyze AIs' IPO bidding behavior in response to pre-IPO EM.

This examine the impact of environmental, social and governance (ESG) performance on financial reporting quality (FRQ) before and during COVID-19 in the Egyptian market.

This study uses quarterly data from 2017 to 2021 to draw conclusions, with a sample consisting of 486 firm-year observations for 27 Egyptian companies listed on the Standard and Poor’s/Egyptian Stock Exchange ESG index. This study uses both firms’ ESG scores and the Beneish Model, an earnings detection model, as proxies for FRQ. COVID-19 effects on ESG performance and FRQ were examined by using Pearson’s correlation coefficient and two-stage least squares.

COVID-19 has a significant impact on the link between ESG and FRQ. This implies that corporations with high ESG performance are less likely to manipulate earnings (having a low M-score) and thus provide high FRQ during the COVID-19 pandemic. Moreover, there is a significant positive relationship between firm size, leverage and M-Score, indicating that large firms typically present a high FRQ.

The sample size and data availability are the main research limitations. Additionally, this study only considers the effects of firms’ ESG performance on FRQ during the COVID-19 pandemic. Thus, future research should consider other factors associated with investors’ corporate social responsibility (CSR).

This research has practical implications for market regulators seeking to establish a legislative framework and enhance guidance to mandate managers to provide ESG data and CSR reports appropriate for Egypt and other developing economies in times of crisis.

Promoting the adoption of ESG practices in business, particularly during crises, has the potential to effectively provide high-quality and reliable financial reporting required for investment.

This study aspires to address notable deficiencies in the pertinent literature concerning the relationship between ESG performance and FRQ during COVID-19. To the best of the authors’ knowledge, little is known about how ESG performance changes in response to pandemics in emerging markets. To address this gap, this study examines the effects of COVID-19 on the relationship between ESG performance and FRQ in Egyptian-listed firms from 2017 to 2021.